ID :
31698
Sat, 11/22/2008 - 22:23
Auther :
Shortlink :
https://www.oananews.org//node/31698
The shortlink copeid
(EDITORIAL from the Korea Times on Nov. 22) - Fear of `D`: Seoul cannot rule out anything in this crisis
It is becoming increasingly apparent Korea ??? and the world ??? doesn't see the big picture of the ongoing crisis.
Just half a month ago, government officials here said the domestic financial
markets would regain stability since the nation had all but gotten out of the
"dollar liquidity crisis." On Thursday, the exchange rate was threatening to
touch 1,500 won per dollar, while the composite stock price index plunged below
1,000 points with the two key market indices swapping their faces as of early
this year.
As recently as August, most governments were grappling with inflation, as world
oil prices approached $200 per barrel. Now, officials in Washington and Brussels
are saying their economic enemy No. 1 next year would be "deflation."
The U.S. core price index, which excludes food and fuel, fell 0.1 percent in
October, the first monthly decline since 1982. Inflation-stricken consumers may
think it a good thing but persistently falling prices bring about far scarier
consequences to the economy than price spirals by freezing everything ???
consumption, sales, investment and new employment, as shown in the 1930s.
Deflation can be a harbinger of the much dreaded "D" word ???depression.
What makes deflation more troublesome for policymakers is not just that the
business slump is deeper, wider and longer but that there is no particular cure
to treat the declining prices, as they cannot pull down key interest rates below
zero percent. This is why the U.S. and European Union are preparing new hefty
stimulus packages.
With inflation hovering around 5 percent, Korea may be free from the deflationary
fear for now, but recent events have shown symptoms of turmoil across the Pacific
spread here in no time.
Or rather, deflation has already set in: While goods and services prices are not
falling, asset prices have long been declining, as seen by the moribund property
markets. What also makes Korea particularly vulnerable to global downturn is the
nation's undue dependence on exports for growth. If the trend of sluggish or
negative growth spreads from industrial to emerging economies to drastically
shrivel the global export market, the nation will run into its most serious
crisis in decades.
Because of these and other factors, including the weak banking sector, foreign
media outlets hardly fail to include Korea in the group of countries exposed to
the greatest risk, along with Iceland and Brazil, rating Korea's chances at
brushing against state default higher than those of even much smaller Asian
economies, like Thailand and Malaysia.
Most problematic is the economic team of the Lee Myung-bak administration, which
once attacked the unfavorable foreign news reports as some sort of
"Korea-bashing." Little wonder according to some foreign analysts, the nation's
biggest economic risk is "governmental risk." The economic team, led by Finance
Minister Kang Man-soo, has shown neither nimbleness nor good teamwork since the
crisis hit the nation. On the other hand, they were quick to receive credit for
any accomplishment, such as the $30-billion dollar-swap accord with the U.S.,
whose market-stabilizing effect seems to have already gone away.
The snail-paced restructuring of ailing builders and savings banks is but one
example demonstrating the economic team's incompetence and why it has lost
markets' confidence, both here and abroad.
Judged by what officials have done so far, it is highly doubtful that they can
cope with the much worse possibility of deflation by providing sufficient
liquidity, introducing bold reforms and taking aggressive stimulus steps.
President Lee called for Korean businesses to turn the crisis into opportunity
through active investment. Such a call, if unaccompanied by exemplary initiative
and detailed guidance, cannot but ring hollow.
Lee should force his team to change its administrative style to win markets'
confidence. If it cannot do so, he should change the team itself. There must be
far more competent and credible officials if he would only look for them ???
after dropping political and religious biases.
(END)
Just half a month ago, government officials here said the domestic financial
markets would regain stability since the nation had all but gotten out of the
"dollar liquidity crisis." On Thursday, the exchange rate was threatening to
touch 1,500 won per dollar, while the composite stock price index plunged below
1,000 points with the two key market indices swapping their faces as of early
this year.
As recently as August, most governments were grappling with inflation, as world
oil prices approached $200 per barrel. Now, officials in Washington and Brussels
are saying their economic enemy No. 1 next year would be "deflation."
The U.S. core price index, which excludes food and fuel, fell 0.1 percent in
October, the first monthly decline since 1982. Inflation-stricken consumers may
think it a good thing but persistently falling prices bring about far scarier
consequences to the economy than price spirals by freezing everything ???
consumption, sales, investment and new employment, as shown in the 1930s.
Deflation can be a harbinger of the much dreaded "D" word ???depression.
What makes deflation more troublesome for policymakers is not just that the
business slump is deeper, wider and longer but that there is no particular cure
to treat the declining prices, as they cannot pull down key interest rates below
zero percent. This is why the U.S. and European Union are preparing new hefty
stimulus packages.
With inflation hovering around 5 percent, Korea may be free from the deflationary
fear for now, but recent events have shown symptoms of turmoil across the Pacific
spread here in no time.
Or rather, deflation has already set in: While goods and services prices are not
falling, asset prices have long been declining, as seen by the moribund property
markets. What also makes Korea particularly vulnerable to global downturn is the
nation's undue dependence on exports for growth. If the trend of sluggish or
negative growth spreads from industrial to emerging economies to drastically
shrivel the global export market, the nation will run into its most serious
crisis in decades.
Because of these and other factors, including the weak banking sector, foreign
media outlets hardly fail to include Korea in the group of countries exposed to
the greatest risk, along with Iceland and Brazil, rating Korea's chances at
brushing against state default higher than those of even much smaller Asian
economies, like Thailand and Malaysia.
Most problematic is the economic team of the Lee Myung-bak administration, which
once attacked the unfavorable foreign news reports as some sort of
"Korea-bashing." Little wonder according to some foreign analysts, the nation's
biggest economic risk is "governmental risk." The economic team, led by Finance
Minister Kang Man-soo, has shown neither nimbleness nor good teamwork since the
crisis hit the nation. On the other hand, they were quick to receive credit for
any accomplishment, such as the $30-billion dollar-swap accord with the U.S.,
whose market-stabilizing effect seems to have already gone away.
The snail-paced restructuring of ailing builders and savings banks is but one
example demonstrating the economic team's incompetence and why it has lost
markets' confidence, both here and abroad.
Judged by what officials have done so far, it is highly doubtful that they can
cope with the much worse possibility of deflation by providing sufficient
liquidity, introducing bold reforms and taking aggressive stimulus steps.
President Lee called for Korean businesses to turn the crisis into opportunity
through active investment. Such a call, if unaccompanied by exemplary initiative
and detailed guidance, cannot but ring hollow.
Lee should force his team to change its administrative style to win markets'
confidence. If it cannot do so, he should change the team itself. There must be
far more competent and credible officials if he would only look for them ???
after dropping political and religious biases.
(END)
